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CFO Survey


FLORHAM PARK, N.J. and NEW YORK, March 23, 2007 – At its most recent FOMC meeting on Wednesday, the Federal Reserve issued a mixed view on the risks of inflation vs. recession. But CFOs are less ambiguous: They rank economic slowdown as their biggest concern.

Twenty-four percent of the CFOs participating in the 2007 first quarter “CFO Outlook Survey,” conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business, are quite to very concerned about recession, compared to only 10 percent who feel the same about inflation.

When asked to rank economic worries, U.S. economic growth was at the top, with inflation a distant tenth. Health care costs, consumer demand and costs of regulatory compliance were also prevalent concerns.

The Federal Reserve’s decision this week to leave interest rates unchanged is not surprising to the CFOs. Half expect interest rates to remain unchanged over the next year, while 35 percent expect to see lower rates over the next 12 months.

While the Federal Reserve hasn’t raised interest rates since June 2006, it increased rates at 17 consecutive prior meetings. Still, 14 percent of the surveyed CFOs say credit availability has eased over the last six to twelve months to a year, with only 5 percent saying it has tightened.

Companies are continuing to increase their capital investments. The weighted average expected increase in capital spending over the next 12 months is 8 percent, compared to 7 percent last quarter. One out of five companies (19 percent) is making “ambitious” investments in capital expenditures, compared to only 7 percent that are holding off on all or nearly all capital investments.

CFOs forecast a weighted average increase in technology spending of 9.5 percent, and expect new hiring to increase about 5 percent over the next twelve months.

Although inflation is not a major concern of CFOs, they are feeling higher real estate costs. For companies renting space, half indicate that rents are rising -- modestly for 41 percent and significantly for 9 percent.

Regulatory and Corporate Finance Issues
Reacting to this month’s conference in Washington on the global competitiveness of U.S. capital markets, 83 percent of the CFOs say U.S. financial reporting regulations hinder the ability of U.S. capital markets to attract new listings vs. other major financial centers around the globe.

Regarding earnings guidance, almost two out of three public companies in the survey favor the elimination of quarterly earnings guidance (64 percent) or providing guidance only annually with a range of earnings per share numbers (63 percent).

“U.S. competitiveness is hindered when dollars are spent on disclosures and accounting requirements that lack meaning to investors and divert management’s attention from the business,” said Michael P. Cangemi, President and CEO. “Easier to understand financial statements should be our mutual goal.”

The CFOs also feel strongly about options backdating improprieties. Sixty-nine percent think companies that fraudulently backdated options should be fined, compared to 8 percent who do not think a fine is appropriate. An additional 11 percent support another penalty, the most common being personal fines and/or corporate fines combined with a criminal penalty, like imprisonment.

About the Survey
Full survey results are available at or from Andrew Healy at

This quarter, the CFO Outlook Survey, conducted by Financial Executives International and Baruch College’s Zicklin School of Business, interviewed 244 corporate CFOs electronically the week of March 12. CFOs from both public and private companies and from a broad range of industries, revenues and geographic areas, including some off-shore companies, are represented. Survey respondents are members of Financial Executives International.

Revenue-weighted averages are provided for projected changes in capital and technology spending. An employee-weighted average is provided for the projected changes in hiring.

FEI has been conducting surveys gauging the country’s economic outlook from the perspective of CFOs for the past nine years.

About FEI
Financial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its 15,000 members hold policy-making positions as chief financial officers, treasurers, and controllers. FEI enhances member professional development through peer networking, career planning services, conferences, publications, and special reports and research. Members participate in the activities of 86 chapters, 75 of which are in the United States and 11 in Canada. For more information about FEI, visit

About Baruch
Baruch College, founded in 1847, is a senior college of the City University of New York. The Zicklin School of Business at Baruch College is the largest and most diverse AACSB accredited collegiate school of business in the nation. Baruch has a long tradition of producing accounting and finance graduates who become leaders as CPAs and CFOs.


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